Skip to main content

tv   Squawk Box  CNBC  November 13, 2012 6:00am-9:00am EST

6:00 am
below fair value. s&p 500 down by almost will 8. nasdaq off by just over 15. stocks yesterday ended the session flat. and i mean really, really flat. dow down by about 1 point. s&p up by 1. so this is a do over today. trading was quiet. bond market closed in observance of veterans day. we'll be joined by marc faber at 6:15 eastern. aped then at 8:30, mohamed el-erian. in corporate news, jcpenney was the biggest loser in the s&p 500 yesterday. we'll be talking to bill ackman, he disagrees with andrew's column that calls for a dose of realism for the ceo ron johnson. we'll hear from bill himself a little later this morning. plus ursula burns is a very busy person.
6:01 am
xerox holding investor conference today. she's also a part of the business round table calling for action on the fiscal cliff. she's meeting with president obama on this topic tomorrow and was recently elected to exxon's board. she'll be joining you live at 7:00 eastern. joe, i believe you have breaking earnings numbers. >> home depot 63 cents, a nonrecurring item in there of 11 cents a share. due to the previously announced closing of seven stores in china. on an adjusted basis, the company reported earnings of $1.1 billion or 74 crepts a share, 23% above the same period last year and 4 cents above expectations of 70 cents. third quarter results were better than we expected and reflected in part what we believe is the start of a path towards the healing of the housing market according to
6:02 am
frank bica who we hopefully have a picture of in his full regale i can't, full orange home depot apron. because he's an endearing looking guy who you would trust him at your house. there he is. i love him. >> he does have his apron on. >> and i want to thank all of our associates, and there is also as i go through the press release here, based on the third quarter, we're updating our fiscal 2012 guidance and raising our sales growth guidance. be up approximately 5.2% on a 53 week basis. and the company expects full year 2012 to be up 18% to 292 a
6:03 am
share which is weird because 2.97 is where actually -- that takes out the 11 crepts. add it back in and you get 3.03. >> the healing of the housing market. >> you wonder how much was hurricane sandy, too, which obviously -- >> would have been part of it, i guess. this is probably ending october -- what's the date? >> so this is probably october 31st. >> stock not doing much ahead of this news. >> a lot of corporate news this morning. microsoft head of its windows unit has left the company barely two week after launching windows 8. he was widely rumored to be in line as the next ceo and it's the latest in prominent high
6:04 am
profile departures. take a look at shares of microsoft, up about 4% in the last year. we have cnbc tech reporter jon fortt will join us in a little whirl with more on the story at 7:00. and the new york stock exchange anticipate as normal session today after trading in more than 200 stocks were suspended yesterday due to a technical problem with a server. stocks in question continued trading in other markets. and a little goldman sachs news. they will reportedly tap the smallest nuch executives in more than a decade to join it highly coveted partnership ranks. goldman exacted to announce the promotion of only about 70 employees to partner. roughly one third less than knows named back in 2010.
6:05 am
>> did your buddy make it? i have to explain as -- greg smith didn't make it? >> no, he did not. >> are you sure he wasn't on the list? >> he was not on the list. i think that's one of the reasons he ended up writing that book. i believe he made have made more money writing that book than some partners made this year. >> you checked, he is definitely on the -- >> pretty confident he's not. best headline of the day goes to the daily news. in the line of booty. i didn't get your jokes. >> life time has a show called army wives. they could did a reality show based on this who petraeus --
6:06 am
>> army wives is a good show about people who are really putting up a tough front while their spouses are away. >> bravo is another story. >> we could talk about a real housewives of tampa or real housewives of charlotte where a lot of this -- >> i don't think these are indicative of army wives. >> the story seems to be out of control. and none of these people are actually true army wives. >> jill was getting nasty stuff from paula, but do we know whether jill was intimate with -- >> no, we don't think so, but there's a whole new thing. the fbi -- >> you called him general petraeus? >> no, that was your hair. >> what about the fbi agent who is sending shirtless pictures of himself prior to the investigation? it's like a -- >> you think he should go the full monty?
6:07 am
>> and now colonel allen is involved in this somehow. i mean, i'm telling you, this is like a soap ap practiopera. >> it is. but i have no idea what to quote. viagra? pfizer? i have no idea how we make this a business story. but let's get to congress. as we mentioned, when you say lame, it just seems like you could always use that with congress. but in this case it's a lame duck returning to session. legislators facing a seven week deadline to reach agreement on scheduled tax hikes and budget cuts that threaten to send the u.s. almost off a fiscal cliff. a sum met set for friday. i like the "new york times." democrats like a romney idea. >> did you see paul ryan's comment? >> no. but i got my button back on because i'm -- i'm going to tell that you rise above is kind of like a rorschach thing. because for me, rise above means
6:08 am
democrats rising above the obsession with rates and realizing broadening the bates is better -- >> it means coming together. >> that is a way of coming together. you're raising revenue. your only way is if the republicans say yes -- >> no, that is not true. my way is anyway you come up with an agreement is a great way. you're only looking from one side of the aisle. >> but they'll never agree to raising rates about sfw. >> i will give you that it is a error sha rorschach test, but i want you to actually cut some things and i want you to deal with expenditures. >> you have the same house that said no to 39.6 on the high he said. but a way of raising revenue
6:09 am
will spur growth -- they're coming around to the correct version right here. >> what about the idea democrats say we will take on the social issues, we will take on makinging sure that we're cutting down the road. >> and this side will raise revenue by broadening the base. but by lowering rates, not raising. >> what i'm not fond of is the idea of kicking things down the road. because that's not a fix either. >> when i went into talk to our guy, i'm getting a lot of mail from people who say, joe, please convince me that this is not a campaign to cause the republicans to cave on taxes. and i he told me he's getting mail from the left saying tell me this is not a campaign by the republicans now that they've lost to president obama to --
6:10 am
>> i get that e-mail. >> i'm sure you do. >> if me rising above means coming to the realization that coming to the base and raising revenue by lowering rates but getting rid of loopholes and deductions is the way to go. otherwise i have other buttons i can wear. i told you, i have a button that says i love hot dogs. i don't think i should -- i do love hot dogs. >> i think suspenders tomorrow and the flare. >> where is your button? >> i don't have it on me. >> why do yyou say button? >> i don't know. do you know the book -- >> because he has 2-year-olds. when you have 2-year-olds, that's how you talk. >> keep your 2-year-olds away from elmo. that's all i'm going to say. >> do you know the story corduroy? >> it's a teddy bear.
6:11 am
>> yes. and he's missing a button. >> correct. >> and that's how max and henry would say it. >> when 2-year-olds -- >> we haven't even talked about he would know today. that is -- that is a business story talking about sesame workshop and the eventually indication. >> should have closed down long ago. >> i hope who this whole story is -- >> we're together on that. >> now that you've kyle, still the favorite. >> yeah. why don't we take a look at the markets. the futures are under pressure today. you'll see that the dow down by about 77 points. been down 60 to 60 points over the last half hour. some pressure has come back in and probably a lot of people waiting to see what happens with the fiscal cliff situation.
6:12 am
everything starts back up again today. you'll see in europe, similar moves there. right now the cac down by 1% as is the dax. ftse 100 down almost 1% in london. in asia overnight, markets closed slightly lower there. kospi off by 2%. shanghai composite 1.5%. hang seng by just over 1%. oil prices this morning slightly lower. down about 82 crepts. ten year note 1.58%. been a while since we've seen below 6%. the dollar is down against the yen, but up against the euro. euro is all the way back at 1.2677. dollar-yen at 679.
6:13 am
36 and gold prices are down about $6. >> time to go across the pond to kelly evans. >> those levels give and you good sense of what's happening out here. it's not pretty. definitely a risk off kind of morning and it has everything to do with greece. first weed had the spat between lagarde and euro group president where yoger seemed to indicate greece would be given more time and lagarde publicly said not so fast. so while you have the official bodies disagreeing, "grease" today going to market to raise short term funds to stave off defau default. 5 billion was the amount of the
6:14 am
role over but only raised a little over 4 billion at the auction. now, it's apparently the case that it can use noncompetitive process over the next couple of days to fill that 5 billion euro quota, but not an encouraging read for the health of banks. and the greek market was selling off after that auction just about an hour or 90 minutes ago. european stocks down almost 1% across the board. euro taking a beating and the ecofin still not indicating greece will get the funds immediately. so as we get into the u.s. trading session, even as people are feeling more optimistic resolving the fiscal cliff, the situation in europe is continuing to worry people. back over to you. >> kelly, thank you very much. if there's gloom and doom out there, mark fc faber will f
6:15 am
it. he joins us live from hong kong. we know that you're warn building this big meltdown. how much of that is because of the fiscal cliff, how much because of the election? we haven't had a chance to talk to you since the election. what do you think? >> actually i'm so happy to be on your show because whenever i feel depressed and i see you, you group of people that are so optimistic, i feel enlightened and again full of life. so i think actually you should open up a clinic for depressed people and you would do very well because everybody would be good after talking to you. >> but would we be fooling them into feeling good? >> i think the point is i don't think markets are going down because of greece or the fiscal cliff because there won't be a fiscal cliff. they'll do some patch work and it will be tax increases come into play in five years time and
6:16 am
a bit of spending cuts that come in 100 years. and then everybody will be happy and they'll be a rebound in the market. but the market is actually going down because i think that corporate profits will begin to disappoint and that the global economy will hardly grow next year or even contract. and for that is the reason that stocks from the highs in september at 1470 on the s&p will drop in my view at least 20%. apple has already dropped more than 20%. >> what's causing this global shedo do slowdown? is there any way out of this or is this a messes that we have to live with right now? >> each country has specific problems. i was in vietnam, i've seldom
6:17 am
see seen such an overbuild real estate market. it will take years to absorb everything. and vietnam property market is a microcosm of the chinese property market. it will also take years in china to absorb all the properties that are being built. in the western world including japan, the problem is we have too much debt and that debt now will have to be somewhere somehow repaid or it will slow down economic growth. and so i think that we live beyond our means 1980 to 2007 and now it's pay back period. >> it's pay back period but if you have a situation that you expect where the fiscal cliff is one that we never address, we just kick the can down the road, and deal with it another day, when does it actually start to catch up with us? >> i can't tell you precisely
6:18 am
the day, but i think the whole global financial system will have to be reset at some problem. and it won't be reset by central bankers. but by imploding markets either the currencies or the debt markets or the stock markets. but it will happen. it will happen one day big time and then we will all be lucky if we still have 50% of the asset values that we have today. >> so if we were to handle the fiscal cliff -- >> it's a very optimistic scenario. >> there are a lot of people who have talked about this scenario. something that definitely worries me, too. p but you is it a situation that could be avoided if we tackled the fiscal cliff and actually made some tough decisions right now? if we grasp at austerity the way some of the europeans have done it, there are people who say we don't want to do it that way, look at what's happened to europe, but is it your thought we need to deal with the
6:19 am
medicine and suffer the pain at some point? >> for sure there will be pain and there will be very substantial pain. the question is do we take less pain now through austerity or risk complete collapse of society in five to ten years time. and in a democracy, they're not going to at that time patat tak. they'll kick down the problems and they'll become bigger and big ir. >> so you think we won't be able to to anything until it's too late, that we won't have the preliminary will to go ahead and at that time tough decisions now and that's why we'll end up -- >> correct. i think -- i don't want to leave you without some optimistic words. >> now that you've talked about the complete collapse of society, tell us about the bright side of things. >> i've recently been on to vee
6:20 am
either ma'am, cambodia, laos, of course thailand because i have a house there and myanmar. that whole region is known as southeast asia. and i think that region of 250 million people will continue to grow regardless because you have a relatively high gdp per capita in thailanthailand, and the surg countries have a g igdp per cap less $1,000. the countries opening up now and i think with the trade links and transportation links that are being expanded regardless of what happens in the world can grow. provided there is geopolitical
6:21 am
stability in asia which is a big question mark. >> so the situation in vietnam, you said the housing bubble is going to take years to get through. but you still think the growth statistics will trump that? >> yes, but you see in vietnam from the peak exports in 2008 up to today, the export performance of vietnam has been the best of any emerging market. better than china, better than columbia, and much better than say eastern european economies. >> so your bright spot is that all of western society is going down the toilet but if we move to laos, we might be able to make $3500 a year? i know i can buy a lot -- >> joe, you're a nice person, but --
6:22 am
>> that doesn't sound that great, marc, to me. and i resemble that you said that we're like pollyannas, that we're constantly optimistic. that's the wrap on -- i got to sue for you definition of character. >> sorry, i didn't mean to insult you. i wanted to say something nice about you that you're an optimistic person. >> i'm buying a gun. i'm not optimistic. don't throw me in there. i'm reading about the u.s. military forces training for zombie apocalypse. it's true. anyway, marc faber, i appreciate you sitting there smiling the whole time you're saying this stuff. we want to see you again tonight. >> we're thinking maybe you're right about this. >> okay. that care. >> you you haven't seen walking dead yet. >> i haven't. >> if you see walking dead, you will -- just in case. i mean, they don't have to be zombies. they can just be inter-lopers.
6:23 am
>> children of the corn? >> you'll find them off with -- what have you got? hit them with corduroy. >> with elmo. coming up, we'll talk shares of j krchlcpennejcpenney. off almost 50%. but first, how ron johnson could be going wrong when "squawk box" returns. [ male announcer ] how do you trade?
6:24 am
with scottrader streaming quotes, any way you want. fully customize it for your trading process -- from thought to trade, on every screen. and all in real time. which makes it just like having your own trading floor, right at your fingertips. [ rodger ] at scottrade, seven dollar trades are just the start. try our easy-to-use scottrader streaming quotes. it's another reason more investors are saying... [ all ] i'm with scottrade.
6:25 am
6:26 am
right now you can see the dow futures down by about 68 points. s&p futures down, as well. we're looking at weakness after the market actually gets back to trading. yesterday the bond market was closed for veterans day, so we did see a quieter session with the equity markets barely budging at all. let's get to today's national forecast. reynolds wolf joins us. >> a lot to share with you you today. seems like right now most of your action will be on much of the eastern seaboard. as we zoom in, we can expect showers in the carolinas clear up to new england. by the afternoon, they'll be moving out. highs today mainly just in the 40s and 50s. cleveland, the cold air is in. 36 as high as you'll go. nation's midsection, check it out from fargo, 33. 62 in dallas.
6:27 am
very breezy in new orleans today. and you can expect it cool and dry through the plains. farther out towards the west, you can see some rain in the valleys. mountains can be expected over the cascades. very dry for you across the four corners. highs mainly in the 40s, fifth and even some 80s across the region. in terms of travel weather, a lot of have you to go out and about today. you have to fly around the country. you can expect some backups. new york and washington, minor delays. they may stack up a bit into the afternoon, so be patient out there. and then boston, seattle, mostly minor. los angeles, no issues to speak of. a little marine layer, but you should be just fine. let's pitch it back to you you. >> did you actually just run out to the set? did we catch you? >> a little bit kind of sort of, but not really. i was really intrigued by last block. we heard a little bit of corduroy the bear and the
6:28 am
societal collapse. >> sorry. >> are you kidding me? i was terrified last block the stuff we were hearing. >> zombies. >> search government preparation for zombie attack. where are you based, are you -- you're not in georgia, are you you? >> we're in atlanta. >> oh, good. that's where the walking dead takes place. >> you're exactly right. so we have got zombie patrol out right now and still looking for one of the zombies as the corduroy bear. love it. >> reynolds, go for the brain. p through the eyes. >> will do it. >> i like it, he plays with us. in sports news, monday night football, steelers winning their fourth straight by escaping with a 16-13 overtime win over kansas city. roethlisberger is like a giant when i see him play. he's like wide. he left the game -- you got to be big to hurt his right shoulder.
6:29 am
byron leftwich completed 7-14 for 73 yards. steelers are 8-0 at heinz field on monday nights since the stadium opened back in 2001. >> and in corporate news, jcpenney stock falling another $3 to close at just below $18, the lowest price since march of 2009. take a look at that chart. when the united states was back in recession, it's been a while. in my column this morning, i look at ceo ron johnson and we'll have bill ackman on to talk about this. i was looking that you all the things that ron johnson has been saying. he religiously seems to compare himself and the company to apple. he really believes that he is -- >> part of the apple magic? >> he's redoing apple. he said staph jobs had a hard time back this early 2000 you when he first got the job and i've seen this, he claims he's seen this movie before. i'm a little worried that the movie doesn't he said the same way the apple movie ends. and i think there's some bizarre
6:30 am
misperception that he's selling amazing goods. >> your point is that jcpenney is different than apple in terms of the stuff they sell. >> yes. so you could -- >> that's a good point. you thought about this for a while. the thing with johnson, he's -- maybe he's delusional. >> he's arrogant. i don't think that's the -- >> delusional makes you a little off. >> i think it's a much tougher job than he realized he was getting in to and retail is a tricky space and particularly when you go in and you decide to change the entire way things are done by saying we're not going to do the sales anymore. you drive out all of the -- >> i don't see any comparisons. >> he's trying to do the check out with your iphone. >> but you're still buying
6:31 am
penney's crap. >> but the stores he's renovating are actually doing a lot better. >> isn't that just a small piece? >> 11%. >> how do they get stuck with so much stuff that they had to discount? >> the problem is that they got rid of the promotions. they got rid of the discounts. >> but the other problem is they did this really great ad campaign before they had the product ready to go. >> he could have pursued the strategy, stuck with the old marketing strategy, the old look until the product was ready. and then i think he might have had a shot. but at this rate, $500 billion on the balance sheet, they want to spend a billion dollars to renovate the stores. and they just lost 123 -- >> how much on the balance sheet? >> 500 million, not billion. they got a billion and a half
6:32 am
credit line. >> if they had 500 billion, is that stock is undervalued. >> bill ackman will come on and talk about it. >> so they're spending more than they had. >> we did have an analyst on with the disappointing sales numbers who said that he still gives them another year to turn this thing around. the question is how long do you think that the story line can continue and the other question is once you drive away shoppers like that, do they come back. to me you've already lured them back in with your great marketing campaign. you won't fool them twice. >> bill ackman coming on to yell at you? >> that could be. maybe i'll yell back. would you like that shall. >> i would. >> do you want a yelling fest? >> i want a reasoned debate. i want heat, but also light. i don't want just heat. i want light to be shed on on the subject. >> we will endeavor to have some
6:33 am
heat. heat and light. in the meantime, let's talk about investing and how the individual investor will be affected by the u.s. economy if it goes over the fiscal cliff. ceo of edward jones which manages $635 million for 7 million clients across the country. is that billion? >> billion. >> see, and it said million. >> keep messing this up. we had jcpenney with 500 billion -- you have more money than jcpenney. >> you have individual financial advisers that have more than 635 million. >> that's correct. well, we have 7 million clients and $650 billion under our care right now. >> so how are you prepping yourself for this momentous occasion? first of all, are you handicapping that we're going over the cliff? >> i'm not willing to make the guess. our opinion is we don't need to go over the cliff. there is nothing good that will come out of it.
6:34 am
it will hurt the economy, the markets. it will hurt employment. it will hurt the u.s. reputation. possibly our credit rating. >> if you're not handicapping what's going to happen, how are you -- >> we're helping our individual investors to stay invested, but especially be in quality and be well diversified. don't try and time the market. but at the same time, they're frustrated, concerned, worried about the washington grid block and whether something will be done. >> if an investor called you tomorrow and said i've been out of the market for the past couple year, i have a million bucks, whatever, name your number, i'm thinking of investing it, and i'd like to invest it tomorrow, would you tell them that's a good idea? >> number one, i'd say what are you trying to accomplish. why are you investing. trying to put the kids through college, trying to prepare for retirement? >> five or ten year time horizon. would you invest tomorrow or wait it out? >> i had invest tomorrow, but do it in a way that reflects the risk tolerance of the individual
6:35 am
and is targeted toward the time horizon as well as the objectives of the investor. you can't be successful investing if you're not invested. we don't believe that you can time the market. you need to be invested, but you also need to pay attention to what's going on, stay always with quality and make sure you're appropriately diversified or you're looking for trouble. >> bonds? >> bonds are difficult right now. medium to short maturities. you're giving up an awful lot in the way of any yield that might be available. but there's a tremendous risk to the principal value when ratie s rates go back up. >> you have to know your client. that's a rule now, isn't it? but then again, i think what andrew is getting at is let's say you have a pure stock market investor that's young and wants to take risk. is this the time where you -- see, my entire thesis got thrown for a little bit of a loop. i went to a hold on my 30% for
6:36 am
the year. did i tell you guys that, that i downgraded that -- oh, i did. on a specific date, yeah. >> on the day that -- >> november 7th. yeah, november 7th, i went to a week hold. so it got off track on my whole thesis. but did you just hear faber, faber is faber, but he said 50% all assets down around the world before it's all said and done. >> i don't subscribe to that but i'm not an economist. there are good quality companies selling at very reasonable prices that have terrific earning, cleaned up their balance sheets. >> but if you were going to sell something and there were tax implications, before the end of the year might be a good time to sell. >> if you're a higher income earner, you're probably -- >> even dividends. >> do you recommend people get out of heavy dividend stocks? >> no, no, dividend paying
6:37 am
stocks are one of the most resilient ways to be invested over a full market period of time. >> and those are not -- that's been the story the past -- >> you have to take a look at the individual opportunities. you all were talking about jcpenney before. probably not a stock that you want to be buying over a long period of time. there are great companies out there with terrific balance sheets and good earnings. >> do you have people -- have you advised people to maybe keep a little more cash on hand? >> absolutely. depending upon what it is again that -- how they feel in terms of the risk tolerance that they've got. there's a lot of volatility, a lot of concerns. we think there's an opportunity, though, in every market pull back and there is right now. >> okay, jim, thank you for coming in. appreciate it very much. coming up -- you you really appreciate it very much? >> do i i do actually. >> i did, too. in his case, you --
6:38 am
>> in his case. >> okay. coming up, one of the biggest entertainment launches of all. i heard that there's going to be a lot of people calling in sick because this game came out. >> really? >> yeah. and there are zombies in this game, too. details when "squawk box" comes back. tdd#: 1-800-345-2550 this morning, i'm going to trade in hong kong. tdd#: 1-800-345-2550 after that, it's on to germany. tdd#: 1-800-345-2550 then tonight, i'm trading 9500 miles away in japan. tdd#: 1-800-345-2550 with the new global account from schwab, tdd#: 1-800-345-2550 i hunt down opportunities around the world tdd#: 1-800-345-2550 as if i'm right there. tdd#: 1-800-345-2550 and i'm in total control because i can trade tdd#: 1-800-345-2550 directly online in 12 markets in their local currencies.
6:39 am
tdd#: 1-800-345-2550 i use their global research to get an edge. tdd#: 1-800-345-2550 their equity ratings show me how schwab tdd#: 1-800-345-2550 rates specific foreign stocks tdd#: 1-800-345-2550 based on things like fundamentals, momentum and risk. tdd#: 1-800-345-2550 and i also have access to independent tdd#: 1-800-345-2550 firms like ned davis research tdd#: 1-800-345-2550 and economist intelligence unit. tdd#: 1-800-345-2550 plus, i can talk to their global specialists 24/7. tdd#: 1-800-345-2550 and trade in my global account commission-free tdd#: 1-800-345-2550 through march 2013. tdd#: 1-800-345-2550 best part... no jet lag. tdd#: 1-800-345-2550 call 1-866-506-9616 tdd#: 1-800-345-2550 and a global specialist tdd#: 1-800-345-2550 will help you get started today.
6:40 am
6:41 am
part of a whole new line of tablets from dell. it's changing the conversation. ♪ can i still ship a gift in time for christmas? yeah, sure you can. great. where's your gift? uh... whew. [ male announcer ] break from the holiday stress. ship fedex express by december 22nd for christmas delivery. call of duty, black ops 2 goes on sale today.
6:42 am
people probably calling in sick. so if you call in sick today -- >> it look like a movie. >> looks really cool with the zombies. activision vus raised its full year outlook on expectations of strong holiday sales. one new perk is that activision will allow gamers to live stream on u tubiyoutube. i guess you can play with somebody else through youtube. >> i don't know how we ever lived without zombies. because when you kill a zombie, you don't really feel that bad. he's already dead. so armies of zombies can come at you and as a kid, you can have a gun and just mow him down, but they're already dead. like a lot of ideas that we promise you wiulgate here. but that was a big leap in game
6:43 am
playing and fiction for tv. because these zombies, you never run out of them on walking dead. whenever things get a little quiet, you just know they're behind a tree, in this wing of the prison, they are -- >> they're on their way. >> zombies on the way. they are scary. you did want to kill them because they eat you just like that -- i'm not into them. >> you're into this whole -- >> i want to kill them. if they come at me, they're going to die again. >> and you know how. >> i do know how. right through the eye into the brain. >> if you have any comments or questions about anything you see here, when we come back, home depot out with results. we'll get reaction from the street. if congress allows the u.s.
6:44 am
economy to fall or the fiscal cliff, gdp whether shrink almost 3% during the first six months 20613. it if you are one of the millions of men who have used androgel 1%, there's big news. presenting androgel 1.62%. both are used to treat men with low testosterone. androgel 1.62% is from the makers of the number one prescribed testosterone replacement therapy. it raises your testosterone levels, and... is concentrated, so you could use less gel. and with androgel 1.62%,
6:45 am
you can save on your monthly prescription. [ male announcer ] dosing and application sites between these products differ. women and children should avoid contact with application sites. discontinue androgel and call your doctor if you see unexpected signs of early puberty in a child, or, signs in a woman which may include changes in body hair or a large increase in acne, possibly due to accidental exposure. men with breast cancer or who have or might have prostate cancer, and women who are, or may become pregnant or are breast feeding should not use androgel. serious side effects include worsening of an enlarged prostate, possible increased risk of prostate cancer, lower sperm count, swelling of ankles, feet, or body, enlarged or painful breasts, problems breathing during sleep, and blood clots in the legs. tell your doctor about your medical conditions and medications, especially insulin, corticosteroids, or medicines to decrease blood clotting. talk to your doctor today about androgel 1.62% so you can use less gel. log on now to and you could pay as little as ten dollars a month for androgel 1.62%. what are you waiting for? this is big news.
6:46 am
6:47 am
. we wrought you the home depot numbers. beating estimates. raising guidance. joining us on the news line, brian na fwchltgel. anything there that had to do with the storms? >> i assume the storms probably benefit home depot somewhat. they didn't call it out. i expect on their conference call they'll talk about that. but the 4.2% comp which was probably a percentage point better than the street estimate, and i think some of that up side resulted. >> how much of it is reflective
6:48 am
of the improving fundamentals in the housing industry? >> a lot of it. and i think for a while we've been talking about home depot and how the company will benefit from improving housing dynamic in the united states. it's interesting the short press release they put out, i noted that the comment management team made does suggest that they're getting more upbeat. home depot is getting more positive if you will. >> are you on a speaker phone or cell phone? >> it's a land line. >> it is. >> >> crappy. we can't really -- will i was going to -- you can make some quick comments on jcpenney? andrew wrote a big piece today and we have bill ackman coming on. i know you follow it. >> i do. and what i do on jcpenney, and i was on your show last friday talking about it, no question results here in the near term are very weak.
6:49 am
but what i still think that the turnaround will ultimately work. what you have happening is really two different chains. you have the stores that could reform and are performing much better. the old areas of jc pen it any are really struggling. so i think the key for them is to continue to push aggressively to get the reformatting done and get better results. again, results near term i think is really what the stock is reflecting. >> so three years to get there, i mean, think about this, $500 million on the balance sheet today, even if post holiday you can get up to 700, 800 maybe, you get the billion and a half dollar credit line, it is possible if sales continue to decline that you're going to run into a little bit of a problem here mathematically. >> it's possible. i don't think it's likely, though. they'll cut it close. i spent a lot of time looking at the balance sheet and caps position and i was talking to their cfo late yesterday about
6:50 am
this. and they're very -- when they look at the business, they should end this year with they t $1 billion in cash. the key for them to allow the company to continue to generate cash and through next year to support the turnaround effort, so they're essentially spending about $850 million in capex to retrofit their stores. it's going to be close but they should have the cash for next year to fund that and of course they still have a very big revolver which gives them easy access to capital to the extent they need it. >> okay, brian, i really didn't understand a thing you said but thanks for coming on today. i don't know what happened to the phone but we'll try next time and get you in here. >> verizon, at&t, who is taking responsibility for that in. >> he said that was a land line, was that a speakerphone? >> coming up on "squawk," we have activist bill ackman
6:51 am
defending his investment in jcpenney, maybe a smackdown as the stock falls to multiyear lows and ursula burns ahead of her meeting with president obama, stay tuned for that and a lot more as "squawk" rolls on. customer erin swenson bought from us online today. so, i'm happy. sales go up... i'm happy. it went out today... i'm happy. what if she's not home? (together) she won't be happy. use ups! she can get a text alert, reroute... even reschedule her package. it's ups my choice.
6:52 am
are you happy? i'm happy. i'm happy. i'm happy. i'm happy. i'm happy. happy. happy. happy. happy. (together) happy. i love logistics.
6:53 am
if we want to improve our schools... ... what should we invest in? maybe new buildings? what about updated equipment? they can help, but recent research shows... ... nothing transforms schools like investing in advanced teacher education. let's build a strong foundation. let's invest in our teachers so they can inspire our students. let's solve this.
6:54 am
i watched everything but
6:55 am
golf, now i kind of regret it. something i've said a million times, guys, and that is after a four-foot putt or something, you're just really glad that you don't have to do it for a living because the guys that do it for a living one putt for four rounds can make a difference. it's very difficult. in other sports you have the benefit of movement, you know, football, basketball, all of them, where you're not just sitting there like looking at where the ball is and where it needs to go and thinking and preparing and going out. the ball's not even moving even when you're hitting it it's not moving on a drive. so this guy, you know, he had not made the tour before and this tournament that he was in, it mattered whether he was going to be able to keep his card. in the second round charlie belgian in the second round was so nervous that, and he shot 64, but then he spent the night in the hospital with his golf shoes still on, his heart racing, they thought he might have a heart
6:56 am
attack that might after the second round, so the next day he didn't know if he should go back to the course, down in orlando at a disney course, he went back on saturday, he was crying on the range because he was so afraid the feelings would come back. he managed through the next two rounds, bone crushing fatigue and worried about his health and ended up winning his first pga tournament. >> you're playing against yourself all the time. >> and playing against money and you've got sponsors that are only going to sponsor you for so long. you're just infatuated by what is it the twins? >> no, i'm elmo. elmo. if i'm running "sesame street" what am i supposed to do to keep this going? >> when we come back, bill ackman on why he believes in jcpenney. having you ship my gifts couldn't be easier.
6:57 am
6:58 am
well, having a ton of locations doesn't hurt. and my daughter loves the santa. oh, ah sir. that is a customer. let's not tell mom. [ male announcer ] break from the holiday stress. fedex office.
6:59 am
7:00 am
the big letdown. could time be running out for jcpenney's turnaround plan? we'll ask hedge fund activist investor bill ackman, here at another "squawk" exclusive. rising above, to get america on sound fiscal footing, former morgan stanley executive steven roach on the economic challenges facing the country, both here and abroad. finding the right business solutions. >> pc load letter? >> xerox ceo ursula burns weighs in on her company's performance and what happens if the nation falls off the fiscal cliff. the second hour of "squawk box" begins right now.
7:01 am
good morning, everyone. welcome to "squawk box" on cnbc. i'm becky quick along with joe kernen and andrew ross sorkin. we've been watching the futures and they have come under pressure. things are much improved from where they were earlier. at the weakest point dow futures down 80 points, now down only by 27 points. home depot earned 74 cents a share for the third quarter, four cents above estimates and raised its forecasts on what it sees as signs of a housing market recovery. congress returns with one goal in mind, finding a solution to the fiscal cliff. president obama will meet with labor leaders on the fiscal cliff, the first in a series of meetings this week on that issue. more homeowners are paying their mortgages on time these days. transunion says 5.1% of mortgage holders were two months behind in the third quarter, the lowest
7:02 am
percentage in over three years. a major shakeup in microsoft. cnbc's jon fortt joins us from san jose. jon, good morning. >> i can't hear him. >> no, and i couldn't read his lips. i tried. did you see me trying to -- i have no idea what he said. he was talking about microsoft, that's all i know. normally we'd want to check him before i toss to him, just to see if you could hear him, that's just something i would try. maybe google just pulled the plug on that, i'm not sure. are they still rivals? they don't like each other. >> it could be apple, too. let's talk about jcpenney, the sales plunged at jcpenney hitting the company hard amid a transfor transformation by ceo ron johnson. bill ackman is giving the turnaround several years, bill ackman, founding and ceo of
7:03 am
pershing square capital management, on the board of jcpenney, handpicked ron johnson and we'll talk about a column i wrote i think you're relatively disagreeing with the premise of the column which is to say this is a company that is struggling and at least in my estimation and by the way not just mine but i think a number of analysts and investors who say how are you going to get there to the other side. >> sure. >> you got into the stock at a little over 25 bucks, right? >> right. >> the stock is about 50% off for the year. >> okay. >> we're down to the stock about 18 bucks. >> right. >> sales down 26% in the quarter. >> sure. >> how do you see this thing turning around at all? >> first of all let me explain i'm here on behalf of pershing square, these are my own views, not the company's view. first i'll give you a pin. take a pin. have a pin. >> we already have pins. >> these are better pins.
7:04 am
>> these are rise above pins. this is -- when you're down to giving out pins -- >> hold on. >> go for it. explain what's going on. >> jcpenney has been a promotional department store and as part of the transformation of jcpenney ron has gone to launch the fastest growing specialty retailer of all-time, new jcp. hold on, stick with me. >> 11% of the company. >> it's going to be a lot more soon. >> right, okay. >> one of the things he got rid of the coupons and other promotions and took the prices down to the price you used to pay -- >> which is why we used to go to the store. >> what are we doing for christmas. you go to the store and get a pin. on the back of the pin is a serial number, i didn't bring the ones with the serial numbers because you work for cnbc, you type the number in the iphone, the prize could be a trip to disney world, a $500 gift card, a $10 gift card but those are
7:05 am
cute prizes. how do i know it's going to work? i'm in the cafeteria, buying a banana in the cnbc cafeteria and andrea says what are the pins? can i have one? i gave her the pin and explained the jcpenney promotion and she said how can i get more? >> a turnaround strategy depends now on pins. >> what's going on and what you need to look at is two companies. you got a startup, which we call new jcp, started up august 1st, it's gone from zero to 7 million square feet in a month. that's run in 11 years of apple went from 0 and 3 million square feet in 11 years. stick with me. >> okay. >> ron is taking the assets of jcpenney, 111 million square feet of real estate of which 64 million are being are you purposed -- before you interrupt let me explain.
7:06 am
>> it's hard for him. >> 7 million square feet, ten shops, this is the footprint and to your point it's only ten shops out of 100, and then next 40 shops and the year after, 70, and then 100. what's interesting is the first shops are doing $270 a square foot, the rest of the stores are doing $135 a square foot. >> it's doubled. it's a great situation. >> so if you can go from my little picture here, 10% of the square footage. >> upside down. >> to 100, if you replace space that's generating $135 a square foot, a space that's generating $250 a square foot, the whole store will be doing $250 a square foot and took the costs down $900 million. hold on. >> okay. >> what you have to look at is
7:07 am
the problem people have it's hard to look at the company on a consolidated basis. on a consolidated basis it looks terrible, you're right. but new jcp as a startup, going from 7 million to 70 million. >> if you were starting with a blank slate i'd agree with you but you're not. >> i'll tell you why it's better. how do you grow from zero to 70 million square feet in three years. you can't do that as a startup because you don't have the real estate. what slows down the growth of a retailer it takes time to build stores. he has the supply chain, 111 million square feet of real estate and as he opens a new shop, hold on, it's important i know on cnbc you like things really short. let me explain. the fastest growing retail startup of all-time, high dollars per square foot, high gross margins, stick with me, low overhead and the thing he needs to do and i'll give you a chance to cut in, in a second. he's winding down the old
7:08 am
jcpenney and using the cash flow from the old jcpenney to fund the growth of the business. >> now it's my turn, i'm sorry. >> hold me one last thing. >> we're not doing an advertisement for jcpenney. >> i'm not advertising, i'm explaining. >> you can't sit here realistically and say you're not disappointed when sales are off by 26%. >> of course i am. ron is, everyone is, absolutely. >> that is not part of the plan. >> absolutely not and he's working hard to change that. >> i give you credit to say this 11% is doing great but you got to get from 11% to 100% and do it in three years and by the way you got to do it while you have sales declining, accelerating, the declines are accelerating, if they continue to accelerate, meaning next quarter, sales are worse than this quarter, it is possible. >> it's not an acceleration issue. >> it is in part because -- >> let me concede the point. if you go 19 down 22, down 26, down 35, down 40, we're done.
7:09 am
there's no ceo in the world who is going to let that happen and if that's not working we're going to make changes. we're not going to blow through all the cash of the company until it's at zero. >> would you change the marketing strategy? look i look at what you're doing and i've talked to another number of analysts and investors what you're doing strategically may make sense ultimately but the marketing and promotion and the way this has been approached has been all wrong in that it's come too soon and too fast. >> okay. >> meaning you've advertised you have this whole new fancy store and most people who walk into the store don't see the fancy store. >> we haven't advertised the fancy store. >> you've gotten rid of the promotions and coupons that got people into the store. >> ron johnson is not like no promotion and it's not working and i'm not making changes. >> you're doing a promotion for christmas. will there be more promotions in 2013? >> i suspect there will be. >> he has to go back on the
7:10 am
strategy as well. >> he's not going back on the strategy. >> the strategy is fair and square pricing. >> the pricing is not changing. >> the idea was no discounts, we're just going to do square and square pricing. now we're adding discounts. >> there's difference between marking a good at $40 and giving you a coupon 50% off. when people go into the store they buy. the issue we have is traffic. they go into the store they see the value. >> the reason people were going into the store was coupons. >> would you rather come in with coupons or get the good price every day you walk in. >> it also depends what customer you're going after. there's also a switch going on in terms of the type of customer you're going after. >> not true. >> why not? >> the customers shopping at jcpenney are the customers who used to shop in jcpenney. ron is expanding the customer base beyond to people like yourself. everyone here at this table will shop in jcpenney in 24 months.
7:11 am
>> my wife might. i won't. >> your girlfriend. >> it's like a toyota, trying to turn yourself into a porsche? you agree with that? >> not true. we're not abandoning our core customer. i was in the makeup room and also had my buttons. >> you have a rise above button? that's most important. >> andrea loves jcpenney, i got in the makeup chair and she said jcpenney i love jcpenney and she's a core customer. i don't think i'm making myself clear. hold on, you interrupt a lot. now it's my turn to speak. we're going from 7 million square feet to 64 million square feet. that's going to make us bigger than every shopping mall rete in the world slightly smaller than simon in terms of specialty store square footage. i think the $250 number will be low in time. it's hard when you have my drawing here. >> you say 250?
7:12 am
>> $250 per square foot. when you go to 70 which is where we're going to be pretty quickly all of a sudden it looks like the business plan. >> here is the question, though, how much -- you're a major shareholder. how much time will other shareholders give you? the question is will they give you time to get to 70 and see effects of that? >> the answer is we have to stabilize sales and management is working hard. >> what are you doing to stabilize sales? >> what ron is doing to stabilize sales, one of the things the company has learned is without a reference price, it's hard for people to figure out they're getting good value so in every product we're selling that's a national brand you can buy else where we're giving the manufacturers suggested retail price. we're selling levis at $45. >> like an old tjmaxx trick. if you go to macy's, they sell them at $65 but every day in jcpenney they're $40.
7:13 am
helps the consumer get a reference price. ron started with three kinds of pricing the everyday fair price, what he called month long value and then clearance. that was a little confusing to people so you took away month long value this quarter and what we learned we lost $500 million in sales. >> has to get it back. >> not going to call it month long value but in the store we'll have some things that were 2025 marked to 20. >> do you think it's okay for him to compare jcpenney to apple? >> yes. >> apple has these gorgeous products. >> not 11 years ago they didn't have gorgeous products. the mac was a dying comp, company was running out of cash. >> there's a difference between selling an exclusive successful product that you can't get anywhere else. >> that's not true. hold on you can buy apple
7:14 am
products at target, best buy and you pay discounted prices at the other places. >> how much credit do you give ron johnson versus the product they were sell them self. >> they both deserve credit. we're selling the best brands in the world. we're launching joe fresh, the most successful canadian apparel retailer, they have a few stores in new york, they pay a couple thousand dollars a square foot, opening up across the dpli jcpenney beginning in april. >> what is the ipod of jcpenney? >> 100 different great brands. >> are people going to sit out overnight? >> they won't have to. we're going to open the doors for them. you go into the new jcpenney and there will be 100 shops, typical mall has about 100 shops, person goes into a mall, they shop in four stores, they walk from the parking lot, they go in, into a store, they buy a dress, whatever they try it on, they
7:15 am
wait online, they pay, okay, and then they walk to the store on the other side of the mall and get to four shops. here we have 100 shops in a tight geographic area, your husband has a little ipad that he can be playing with, your kids can be playing with legos in something he calls the street this little area here, look at our little street, something called the square which is going to have food and seasonal prizes. fun place to shop. you can go into 15, 20, 30 shops in this consolidated apple like checkout, iphone, anyone can check you out, it's efficient, nice environment. it's the apple store customer interface combined with the best brands of the world in a small geography. we had $250 a square foot in sales with the traffic down 12%. >> for your sake and for ron johnson's sake i hope this works and i love a great come back story. >> i want to leave our viewers
7:16 am
with one thing. the biggest problem people have with something like this, how can i own a stock when the sales are down 26%? i'll make one analogy and help people think about how to value this company. we took a stake in wendy's, why did people not like wendy's? i get a chance we come back after a commercial, i'm happy to stay. >> i think we're going. >> give me one minute and i'm happy to come back another time. wendy's, people hated the management, there was a fast growing company called tim horton's inside wendys. we separated and the stock doubled. we have this fast growing retail inside jcpenney, profitable and high margins and the rest of jcpenney is shrinking. it's hard to look at it on a consolidated piece. you have to value the pieces separately. if you do that you'll buy the stock at $18 per share. >> thank you for coming and the conversation. >> where are your pins?
7:17 am
>> look for your pins at jcpenney beginning black friday. >> i wouldn't be short the stock. >> you're not. >> thank you very much. >> bill, thank you. let's look at the futures quickly, we have been under a little pressure. you'll see right now that the futures are down by 38 points. we'll welcome steven roach when we come back after this break. americans are always ready to work hard for a better future. since ameriprise financial was founded back in 1894, they've been committed to putting clients first. helping generations through tough times. good times. never taking a bailout. there when you need them. helping millions of americans over the centuries. the strength of a global financial leader. the heart of a one-to-one relationship. together for your future. ♪
7:18 am
7:19 am
7:20 am
joining us is our guest host for the next two hours, steven roach, senior fellow at yale university and former executive of morgan stanley asia. did you do your homework? >> i did. >> this big piece in the "wall street journal" on the economy in china. >> needs work. >> you are a china expert and they go over things and it's in the "wall street journal" if you have an interest they are adding to the workforce which is a big deal, more and more people come into the workforce in china. the number of people in china is declining. they've hit the top and they're headed down the other way. >> joe, there are a lot of challenges in china, there are a lot of challenges in the united states and a lot of challenges
7:21 am
in europe. the difference is china does something we need to think about in the united states, they do strategy and they have a commitment to the strategy and they have the tools to implement that commitment. they have a five-year plan, adam smith has never planned anything in his life or afterwards. >> they went from people living in broken down tenements in urban centers to satisfying the demand that was there to now half empty buildings and totally overbuilt situation. doesn't that set you up for a couple of years of not growing at 10%? >> i think 10% is probably too high. they've done it for 30 years and now they move to more like a 7% to 8% growth trajectory but 15 million to 20 million people per year are moving from the countryside to the city. it's a field of dreams approach. when you build it, they will eventually come. this idea there are ghost cities all over china misses the future
7:22 am
rural urban migration which is a very powerful story, ongoing in china. >> it's on the upswing. in your view we've seen -- >> we've seen the low in terms of the gdp, the production, the trade figures, we're not rebounding vigorously but china will be moving up what into 2013. >> i think i have a minute or two left. the u.s. consumer we have been anecdotally thinking that we've turned the corner there and this has been your thing for years and years and there's more anecdotal evidence now that we've turned the corner. >> watch out with the anecdotes. >> what about consumer confidence and housing? >> i get all of that. you were talking about zombies in an earlier segment. we have a generation of zombie
7:23 am
consumers, overly indebted, short of saving, they have to repair the holes in the balance sheet being overly lefrd on underwater collateral. we're a third of the way through it. the personal savings rates are up but well below norms that were sustainable for the final three decades of the 20th century. so it's going to be a long slog and the numbers, i've said them on this show a zillion times, 19 quarters from q1 '08 through q3 '12, average annual growth in consumer spending 0.7%, versus a prior ten-year average of 3.6. >> 0.7%. >> 0.7, becky. versus? >> 3.6. quite a slowdown for 70% of the economy. >> you're suggesting we don't rebound from that, we don't come back? >> you'll have mohammed on later, he's the father of the new normal if you want to call
7:24 am
him that, and we'll probably do better than 0.7 but not getting back to 3.6 for a long time. >> i guess if we hit the cliff it will be worse. well, yeah, i -- >> you're not a cliff guy. >> i've got my cliff notes right here. i'm not a cliff guy. coming up the ceo of xerox, ursula burns is meeting with the president tomorrow. today she'll speak to investors but before she does either of those she will speak to "squawk," is she is the the new york stock exchange, do we have any pins down there? i think we have rise above pins she can wear one to see the president. >> there you go. that's a great idea. time now for today's aflac trivia question. which suburb of new jersey is home to both ferrari and maserati north america? the answer, when cnbc "squawk box" continues. aflac! ha!
7:25 am
isn't major medical enough? huh! no! who's gonna help cover the holes in their plans? aflac! quack! like medical bills they don't pay for? aflac! or help pay the mortgage? quack! or child care? quack! aflaaac! and everyday expenses? huh?! blurlbrlblrlbr!!! [ thlurp! ] aflac! [ male announcer ] help your family stay afloat at plegh! well, having a ton of locations doesn't hurt. and my daughter loves the santa.
7:26 am
oh, ah sir. that is a customer. let's not tell mom. [ male announcer ] break from the holiday stress. fedex office.
7:27 am
♪ life's been good to me so far ♪ now the answer to today's aflac trivia question, which suburb of new jersey is them to both ferrari and maserati north
7:28 am
america? the answer, englewood cliffs. >> aflac. >> that's actually it. right down the street from us. when we come back the ceo for xerox with the business update on her view of the global economy, also we'll talk to her about the fiscal cliff issue, see what she thinks needs to happen. watching the futures down about 38 points for the dow this morning, s&p futures off by close to 5 points. look at crude prices at this hour, you'll see they are down just about 16 cents. we were down by more than 80 cents earlier, 85.41 is where wti stands now. "squawk" will be back after this. >> you're watching "squawk box" on cnbc, rise above and profit from it. [ male announcer ] at scottrade,
7:29 am
you won't just find us online, you'll also find us in person, with dedicated support teams at over 500 branches nationwide. so when you call or visit, you can ask for a name you know. because personal service starts with a real person. [ rodger ] at scottrade, seven dollar trades are just the start. our support teams are nearby, ready to help. it's no wonder so many investors are saying... [ all ] i'm with scottrade.
7:30 am
7:31 am
welcome back to "squawk box" everyone. in our headlines this morning, the fiscal cliff in focus for investors as congress returns for a lame duck session to deal with this issue. democrats and republicans are both saying that the motivation is there to reach a deal but
7:32 am
they both say there's a great deal of work to be done. we have just one economic report on the calendar for today with the treasury releasing the federal budget statement for october at 2:00 p.m. eastern time. economists are looking for a budget deficit of $113 billion, that compares to a deficit of $98.5 billion a year earlier. goldman sachs is naming its smallest number of partners in over a decade. the "wall street journal" says goldman will promote 70 people to partner this week, this compares with 110 people that promoted during its last round of partner promotions in 2010. it's been a tough year for xerox, the stock down 20%, it's one of many companies that warned about the weakness we're seeing around the globe. the company is holding its annual investors conference today at nyse. chairman and ceo ursula burns joins us. good morning, thank you for joining us. >> good morning, becky. >> i'm looking through the numbers you put out on the business wire release earlier and looking at some of these numbers, the adjusted earnings
7:33 am
per share of 1.09 to 1.15, that's a little bit above what the street was expecting. >> i think we are focusing hard on driving our business particularly in the fourth quarter towards stronger earnings, pulling out all of the stops. we did see an impact, we have seen an impact from weakness particularly in europe on our technology business but we're seeing strong revenue growth and improving earnings in our services businesses. mixed bag. >> you've been talking about your services led business, part of the transformation of the company. at this point how much does that make up of the company in. >> a little bit more than half of our revenues. if you look forward to 2017 it will probably be two-thirds of our revenues not only driven by the fact we are growing that portion of the business but because the market's transitioning, customers are transitioning. they want more than a point solution. they want us to help them change the way they get business done so it's an exciting and growing portion of our portfolio. >> how does that change who your
7:34 am
competitors are? >> it's a great question actually. our traditional competitors in the hardware business is hp and rico and cannon. now we have a large number of smaller less capitalized competitors mixed in with a few large competitors. we have transportation competitors, customer care competitors, we have health care competitors, we're very large in the health care business. this diversified portfolio has us competing against different providers but we differentiate ourselves because we are global, we have a very, very strong brand. we're large so our scale gives comfort to our clients. we use innovation to change fundamentally the way the work gets done so we are among many competitors but differentiated significantly with them. >> the last time you talked was back in october i believe when you talked about that weakness you were seeing in places like europe. has the global economy changed at all over the last few weeks or is it more of the same? >> i think it's a little bit
7:35 am
weaker, so in october we have seen an amazing slowdown in europe. and that continues. the good news is it's not getting much worse but it's not really getting much better at all. u.s. we saw a slowdown in the last couple of weeks in the first part of the quarter for sure. so as we said in october we're seeing slowing in the united states, large enterprises and governments in particular, small and mid sized businesses are still chugging along and developing economies are still good but they've slowed as well, places like brazil and india, while still growing they're growing at a slower rate, one of the reasons why we're so focused on the diversification of the portfolio, health care is growing, color in our technology business is growing so solutions like that are places we're putting a large amount of our energy behind but we're also counting on the federal government to help us with some certainty, one part has been solved, we have a president for the next four years, now we have
7:36 am
to get fiscal tax issues resolved so we can solidify, our customers can feel better and question participate more with them. >> to that point you are meeting with the president, one of many ceos who will be meeting with him tomorrow i believe. what do you plan to tell the white house at that point? what is the most important issue and how do you come at it in terms of giving him some feedback for what the business communities sees in all of this? >> first thing we'll do is listen a little bit to what he has to say and what his plans are for the second term, but i think the business community and me in particular have been very clear. we need a solution to this fiscal cliff that's coming. i have to believe that logic will prevail here with some hard work and it will get a solution and we also need a tax policy that is more business friendly, we need immigration reform that helps us to keep some of the skilled workers. the messages haven't changed a whole lot from right before the election to now. it's kind of the same messages and what we'll say, what i'll
7:37 am
say to the president is we're here to help, here to work. we want a balanced solution that helps all, helps america rise up but we want to make sure that we actually are speaking to people who will listen and i'm hoping that the president and the administration and both sides of congress works. >> ursula, would you -- you know what the two ends of the political spectrum are saying. one wants to lower overall rates but broaden the base causing loopholes and certain deductions. the other seems fixated on 250 and above and letting it go back to the bush years. there's an interesting piece in "the new york times" the left is starting to consider broadening the base. i think there's a lot more money to get at broadening the base, whether it's dividends or capital gains whatever. the real wealthy people they don't take any income anyway. do you think that eventually the president, would you tell him tomorrow to consider looking at that instead of being so fixated
7:38 am
on the marginal rates? >> i will communicate to the president all of the administrators in washington that we need a balanced approach. if that means we have to broaden the base, which i think it does, then that's something we should go after. the approach that we've used in the last four years which is both ends polarized against the middle is not one that's going to help us solve the problem so if it means that we have to actually go in and let's all options i think i heard the president say that, all options on the table, we should look at all options. >> he also said any bill that extends the bush tax cuts for the 250 and above he will veto. it could be a balanced bill that does that, but if it closes loopholes, he'll veto it. >> joe, i would stick with the administrators and the officials in washington to solve the problem. we will tell them the message that it has to be solved and if that means that we have to actually have a balanced approach, which i think it does, let's go after it.
7:39 am
>> will you bring that pin tomorrow and we could probably get you another one that you could actually give to president obama and i mean it's nonpartisan. it just means, see, look what i'm doing, i'm rising above. did you see that? >> i did see it. i saw it. by the way, the reason why i chose to wear the pin, i generally don't like to do advertisements but i do believe the message is a very positive one. >> right. >> and one that is balanced, which is both sides please work on driving a solution. >> we don't advertise either but that's why we're doing it as well, although they are available for $4.99 on our website. no. >> ursula? >> yes. >> there's an article today on politico that talks about how the people who are invited to the white house, that are not apparently from wall street with the exception of ken chenault from american express.
7:40 am
do you think people from wall street should be invited? >> i don't know the full invitee list so i can't comment on who is coming or who is not. i know i'll be there. i'm glad to hear that ken will be there. i think a mixed group of people in the white house serves the president well, the administration well from hearing a mixed message so i hope that he has a broad view, even if it's not in this meeting, i'm sure he'll have many other meetings to come where he can speak to people. >> ursula, we thank you very much for your time today. i know it's a busy morning but a lot of good information and we appreciate it. >> thank you very much for having me. >> thank you. still to come, rbc wealth management ceo john taft on why he thinks dividend stocks will protect your portfolio. plus cftc commissioner bart chilton talks to us what needs to be done for the markets to open after a major disaster, something we saw after sandy. "squawk box" will be back right after this. up next, spanning the sea with c-span, the ceo of the
7:41 am
world's largest cargo leasing company talks global economic risk and outlook for the industry. that's next on "squawk box."
7:42 am
7:43 am
7:44 am
welcome back to "squawk box" this morning. take a look at futures. we have red arrows across the board, dow looks like it would open up 47 points higher, s&p off and nasdaq as well. a continuation of the special shipping series, a ceo calls the container shipping market the ocean highway, jerry wang is co-ceo of seaspan corporation, one of the shipping leaders profiled in "dynasties of the sea" lori ann's new book. good morning, mr. wang. good to see you. >> good morning. good to hear from you. >> we've already had a little bit of conversation about this piece in the journal about the economy that the new leader of china will have and just some of the, you know, right now, unlike past years, it's not unanimous that growth will continue forever in china necessarily. there are people on the other side now that say it's overbuilt
7:45 am
and some of the things are coming home to roost. you take the other side. i think you're more with steve on this. do you think that maybe there's a little bit of slowing but it's a huge opportunity? >> well, for me, we're seeing the worst is behind us. i think q3 data have shown to us the trade volumes, the in and outs recovering from our perspective, our ships are looking well. you look at our ships 95% fully laden from asia to europe, frankly, at this point in time our ships are 100% fully laden, and people have to understand that we talk about international trades, with he talk about value. for our business we talk about the volume. value is one thing but volume is another thing, and during good
7:46 am
times, frankly speaking probably you know, goods are more valuable, probably value is good, and in bad times people will take for more high value commodities, gifts to low value, but potentially more volume-driven commodities, we're seeing the consumers shift in more and more towards low end consumer products. i think you see that from walmart, from jcpenney, on the show about ten minutes ago. so those things are happening. that's the fundamental shift, people are shifting towards more and more low end commodities during bad times. so for our business, this is all about volume. it has nothing t d with value. we are not paid for the value inside the container boxes. we are paid by the number of boxes we carry. we don't really care what's inside. but from what we can see right now the volume situation is very, very promising, and we're
7:47 am
seeing the worst is behind us, 6%, 7% growth for this year and last year was about 7%, 8%, 2010 was 12%. over the last 30 years the growth has been about 10% which is very, very healthy for any industry to be in. you're enjoying 10% growth. >> very good sir. in your view that is the same thing steven said that we had bottomed out and probably on the other side. we appreciate your time coming to us all the way from hong kong this morning, mr. wang, thank you. >> thank you very much. when we come back, we will have much more from our guest host, steven roach, because rbc wealth management ceo john taft and 8:30 eastern moe head el erian, he'll talk about what's working for the nation's biggest
7:48 am
bond fund. "squawk box" is back after the break. up next on "squawk box" don't start your day without knowing the names that will make you money. joe has your list of stocks to watch, right after the break. look at these streaming charts! they're totally customizable and they let you visualize what might happen next. that's genius! strategies, chains, positions. we put 'em all on one screen! could we make placing a trade any easier? mmmm...could we? open an account today and get a free 13-month e ibd™ subscription when you call 1-888-280-0149 now. optionsxpress by charles schwab. i'i invest in what i know.r. i turned 65 last week. i'm getting married. planning a life. there are risks, sure. but, there's no reward without it. i want to be prepared for the long haul. i see a world bursting with opportunities. india, china, brazil, ishares, small-caps, large-caps, ishares. industrials. low cost.
7:49 am
every dollar counts. ishares. income. dividends. bonds. i like bonds. ishares. commodities. diversification. choices. my own ideas. ishares. i want to use the same stuff the big guys use. ishares. 9 out of 10 large, professional investors choose ishares for their etfs. introducing the ishares core, etfs for the heart of your portfolio. tax efficient and low cost building blocks to help you keep more of what you earn. call your advisor. visit ishares. yeah, ishares. ishares by blackrock. call 1-800-ishares for a prospectus which includes investment objectives, risks, charges and expenses.
7:50 am
take a look at some stocks to watch this morning. home depot on a list earning 74 cents a share, four cents above expectations, also raising its estimates for the year and now the stock is doing really well this morning, up almost 3%, we
7:51 am
watched the bid and the ask as the company released earnings earlier this morning in the 6:00 hour and i'm just checking to see whether that's not quite a new high. close, though, 63. 63.20 would be a new 52-week high. i'm not absolutely sure that's an outtime high but the stock has been one of the best performers in the dow as you can see over the last year.'s sporting goods reported third quarter profit three cents above estimates, same-store sales rising 5.1%, becoming much more active in advertising and commercials. they've got some nike-like commercials where people are doing phenomenal things in sports. and the company, i don't remember it ten years ago. i don't know whether it was around, do you? but not -- >> i think it was. >> they've had a huge expansion.
7:52 am
>> dick's has been big at south jersey, not 20 but 10 years ago. >> michael coors earned nine cents above expectations, but revenue is above. did you say something about dick's? >> no. >> got to be careful. see the guy on "fast money"? he'll never recommend that stock again. goldman sachs upgraded dow chemical to buy from neutral with goldman saying any weaknesses in the business are reflected in analyst earnings estimates. goldman notes that dow share performances lag those of its peers and finally take two, investor carl icahn has almost 12%, 11.69% according to sec filings, up from a prior 10.6%. what? >> steven, we were talking a
7:53 am
little bit, your thoughts on the consumer, just this idea that they have to deleverage, that's what we've seen over the last 19 quarters and i think you said the numbers were down to 0.7%. the growth rate. >> inflation adjusted consumption, annualized for 19 quarters in a row. >> that was down from before that. >> 3.6 was the ten-year average prior to that. huge mega downshift, balance sheet recession, we've got a generation of zombie consumers that are haunting the landscape in the united states. >> all right, so put that into the backdrop of the fiscal cliff. what happens if we do see this big decline in spending that's supposed to go in with sequestration along with the rise in taxes. >> the consumption weakness shows you is the economy doesn't have a cushion, so when you hit an economy without a cushion with sharp fiscal consolidation we'll go immediately into recession. i think this fiscal cliff is a
7:54 am
publicity stunt by publicity seeking politicians in washington who love air time on shows like this. >> how can you deny if you add up the expiration of the tax cuts and the sequester, it takes that much money out of the economy. >> no, i'm not denying it at all, joe, it's just not going to happen. ideologically passionate as the left and right are on both extremes they're not dumb enough to push -- >> the true ideologues on both side want to go over the cliff. i could make a case. >> let's push them over the cliff and find the guys in the middle who are going to save the system from going into a recession. >> we had a guy yesterday who said the growth you would get when you unleash the 1.7 trillion on corporate balance sheets from the certainty of paying down our deficit and of reining in our spending that
7:55 am
would overcome the near term austerity. we call it a cliff here. we call it austerity in europe, telling the greeks to go over the fiscal cliff. >> i don't buy the idea that all of a sudden the animal spirits are going to get unleashed. demand is the key, and the point on the consumer is absolutely critical. our company is going to rush out and hire if demand expectations are as weak as we just described, discussing the consumer, i don't think so. same with jobs. >> i think some of the ceos that talk about, i made the point yesterday they're so fixated on quarter to quarter, anything that hurts their business the slightest bit they're obviously going to be against so they're on board with the fiscal cliff stuff even if long-term we eventually need to take our medicine in some way, the way europe is, i know austerity has hurt over there, but you can't spend forever. you don't just renew someone's credit card when they're at $50,000 in debt. >> it's hard to argue with the logic of fixing the fiscal problem, but i think the
7:56 am
politician also come up with a short term patch, will push it into 2013, we'll have some grand summit and come up with a solution that doesn't make anyone happy, it's a lot of smoke and mirrors but will continue to push the fix into the out years as opposed to the near term. >> is that good or not? >> it's not great, becky. we're not solving fundamental problems that ail the u.s. economy. >> you don't really, you're not -- i'm going to take that button back. you don't sound like a rise above person. you're very cynical. >> i would love to rise above. >> you're cynical. there's no cynicism associated with rising above, steven, lose some of the cynicism if you're going to wear that proudly. >> don't take the pin away, joe, please, do anything. >> you've got another hour to earn that pin. maybe we'll get andrew to wear one. >> i'm wearing it right here. >> you're wearing it in your crotch. >> right here, you got that? >> that's down near your belt
7:57 am
that you don't have on. >> there it is. >> he'll move it up. >> put it around back. coming up in the next hour -- i'm going to put it on my head. >> put it on your mouth. >> bart chilton. >> we'll get bumper stickers made. and mohamed el erian has advice from protecting your portfolio from falling off the cliff. let's -- let's start over from the beginning. we were just driving along, comin' back from the lake, and all of a sudden, ka-plam. it blindsided us.
7:58 am
what is it? our college savings account. how do you think it happened? not sure. i think something we bought a while ago turned out to be something else, annnnnd, i remember a lot of other stuff in there had the word "aggressive" in it. is everyone okay? well, now, yeah. who knows later. ♪ wooohooo....hahaahahaha!
7:59 am
oh...there you go. wooohooo....hahaahahaha! i'm gonna stand up to her! no you're not. i know. you know ronny folks who save hundreds of dollars switching to geico sure are happy. how happy are they jimmy? happier than a witch in a broom factory. get happy. get geico. fifteen minutes could save you fifteen percent or more.
8:00 am
preparing for the fiscal cliff. john taft of rbc wealth management on how to position your portfolio for fiscal uncertainty. >> i seem to have fallen down a cliff. i'm still alive but i'm very badly injured. >> and what happens if politicians fail to get a deal? the plus pimco's mohamed el erian on avoiding the debt disaster and his four-point plan for economic recovery. planning for catastrophe, cftc commissioner bart chilton wants to better handle zdisastes like superstorm sandy. the third hour of "squawk box" begins right now.
8:01 am
welcome back to "squawk box" here on cnbc, first in business worldwide, i'm joe kernen along with becky quick and andrew ross sorkin. our guest host is joe taft and former executive of morgan stanley, a senior fellow and a nice fellow. good to be both, more from him in a minute. first though, becky has your morning headlines. >> that's right, joe, in corporate news, microsoft's head of its windows unit has left the company barely two weeks after launching windows 8. steven sinofsky's exit is the latest and most prominent in the line of high profile xart tour as steve ballmer looks to tighten his grip on the company. in earnings news this morning,
8:02 am
dow component home depot came in with 74 cents a share for the third quarter, that was four cents better than the street had been expecting. home depot raised earnings forecast for the year on what it says is a lot of signs out there that the housing market is actually starting to recover, some good news for the overall economy and good news for home depot, too, up about 2.3% in the premarket. let's look at the overall markets this morning, we've been watching u.s. equity futures which have bounced around a bit. dow futures are down 38 points, well off the worst levels of the morning down 80 points. this is improvement over what we saw just about two hours ago. if you look overseas in asia, overnight there were red arrows there. the shanghai composite was off by 1.5% and the hang seng was off by 1% as well. in europe we had seen moves of greater than a 1% loss for most of these indexes but you can see they've paired their losses as well. the ftse 100 down by 0.5% as is
8:03 am
the cac in paris and germany. the dax is off by 0.8%. back in the united states congress returns to session today, this is the lame duck session that is kicking off. legislators faced a seven-week deadline to reach agreement on scheduled tax hikes and budget cuts that threatened to send the u.s. economy off a fiscal cliff. eamon javers, can we expect much? >> the lame duck session does begin today, as you say, and we can expect a lot this week, we'll see a lot of activity, if not real deal making, starting today let me walk you through the schedule of what will happen. congress is back today and also we're going to see the president of the united states meeting with progressive and labor leaders over at the white house, that's today. tomorrow we're going to see the president meeting with business leaders over at the white house, and we're also going to see the president hosting a press conference in which he'll take questions from reporters, remember his statement last week he didn't take questions. he's going to take some
8:04 am
questions tomorrow and of course on friday the president's going to meet with congressional leaders to have negotiations over at the white house on where we go with the fiscal cliff and remember the deadline here is december 31st, so they only have a limited window of opportunity here in november and early part of december to come to a deal. now, my guess is that the noises that are being made here in washington are sort of pro deal at least initially, but we may get to a point here where we come to a real cliff at the end, and maybe it sakes going over the cliff for some period of time before enough pain is felt on capitol hill and lawmakers actually come to that deal you guys have been talking about all morning, becky. >> eamon we'll watch closely. the signals seemed like there's something there. the question is the details again, there always seems to be a devil that arises. >> absolutely. >> go ahead. >> i was going to say that's going on at the same time we've got washington all of official washington this morning totally distracted by this petraeus scandal which is affecting the pentagon and the military so everybody's got sort of one
8:05 am
eyeball on the fiscal cliff and one eyeball on this epic scandal that's breaking out over at the pentagon. >> did "the washington post" steal this "in the line of booty"? >> i didn't see that in "the post" this morning, that seems like a "daily news" classic. >> it has elmo, but "sister act." it's a whole separate issue. >> the question with this sex scandal that's going on right now is who is this woman jill kelley. she had some weird relationship with general petraeus, whether it was physical or not. she had a twin, she was the tampa socialite apparently threatening to paula broadwell who was petraeus' mistress. >> identical twin? >> apparently yes. if you see pictures of them side by side they appear to be identical twins. >> that's a whole new level if you got twins involved you got to admit that andrew, right?
8:06 am
>> this scandal has every possible element. >> twins, the whole, you know what i'm saying. >> yes, that is true. but one other piece of this. what is going on, now there's another general who is involved in this with kelley? >> this is what we found out overnight which is the thing that really has made this scandal explode today which is general john allen apparently had exchanged 30,000 pages of potentially inappropriate e-mails with mrs. kelley in tampa. he was the commanding general of u.s. forces in afghanistan at the time and was communicating with her over e-mail from afghanistan and i guess while he was in tampa. >> he may wanted to overthrow petraeus, is that what the implication is? >> we don't know that. we don't know where things are going there, but clearly allen and jill kelley had some kind of relationship and petraeus and jill kelley had some kind of relationship and i can tell you covering the intelligence world the cia is going to be extremely
8:07 am
interested in who jill kelley is and what her motives were here. the coincidence of having a relationship of some kind with the head of the cia and a relationship that involved potentially inappropriate e-mails with the top commander in afghanistan is something worth looking at. >> 30,000 pages? >> 30,000 pages of inappropriate, what does that mean? >> triple spacing? >> does that mean picture? >> you've had students, triple spacing. >> the margins. it's all courier font and you adjust the margins. >> maybe sharing material, is that what we're talking about? >> it's unclear. i haven't seen the e-mails but your friend and mine ben white at politico tweeted that is more pages than "war and peace" so clearly the general had some spare time on his hands to compose these e-mails and send them off. >> you have twins and then you need two generals i guess. >> maybe it was reply all. >> so much better than "army
8:08 am
wives." will the estate tax kill an economic comeback? joining us now his take is rbc wealth management ceo john taft his company manages $227 billion worldwide. walk us through the estate tax implications and what you're telling clients they need to do. >> it's the area that probably makes the biggest difference to most individual investors around this whole fiscal cliff thing that happens at the end of the year. so right now, just to put the facts out, there's a $5 million exempti exemption on estates when you die. anything over that is taxed at 35%, on january 1st, $5 million drops to $1 million, and you're taxed at 55%, not 35% on the balance. so you take somebody with a $3 million net worth, either a rich person or not, depending on your perspective and today no tax at
8:09 am
their death, in the future, $1 million in taxes at their death. so the questions we're getting from private clients have more to do with what should i be doing to restructure my estate going into next year. >> quickly, this is something that affects most individual investors but it doesn't really because they're dead when it comes up. it affects their estate. >> it affects their estate and leaving a legacy, passing on whatever wealth they've accumulated to their heirs is one of the top priorities for private clients, it's what they worry about a lot. go ahead, andrew. >> what are the things you're telling clients they need to do? can they gift the money right now? >> they can give the money away and die without any value in their estate, most of them aren't that interested in doing that but you're back to the future in some ways, you're starting to have conversations again around the same type of tax structuring that people used to be doing when estate tax
8:10 am
rates were much higher. so for example, the simplest example and one that every individual, you set up a trust, you buy an insurance policy, you put the insurance policy in the trust, the money passes to your heirs without taxation so in the case of the $3 million investor put $1 million insurance policy in a trust, pay the taxes. >> personally i just went through this process. i have a life insurance policy, i joke i'm worth more dead than alive, at least my wife probably thinks that. >> you don't want to be in that position. >> do you think the trusts withstand and are upheld after all of the changes in terms of loopholes and things that go on around the fiscal cliff and changes in washington over the next year in. >> impossible to answer that question because we don't know what kind of changes will be made, but whatever the tax law ends up containing, there will be strategies and devices that individuals can use.
8:11 am
the point being that's what people should be focused on, not asset allocation. >> could you spend 5, 10, 15, 0, 25,000 more building trusts around your whole system and scheme to do all of this and if all of this gets up-ended by the law all that money to the extent you were trying to build all of these protections won't work. >> that's true. the obvious solution, wait to see what the law says. this isn't something that you need to put into place on january 1 unless you have a serious concern about dying between january 1st and -- >> john, what should we do? i can argue it either way. is 35 with 5 million, is that okay, what we should get back to? is that a fair way to do it? >> i think the current estate tax regiment based on what i'm seeing probably sweeps into it most of the people in this country, $5 million in wealth that's a lot of money. >> a lot of money in estates that have never been taxed. you never pay capital gains on
8:12 am
it. >> that's true. >> i don't want people to sell closely held companies to pay for their estate taxes. the real rich people have a way of dealing with it anyway which is not right either, so it's the stupid tax code is so complicated, people that have the money get to hang onto it even though it looks like nominally they're going to get taxed but they're not. it's the effective rate you're talking about. >> it does depend on your perspective. my wife is canadian. there is no inheritance tax in canada. >> you could argue that because you've paid taxes on it. >> once. >> higher rates. >> sometimes you haven't paid it if it's marked up assets that were never taxed like capital gains rates even. >> that's true. >> gets us back to the question what should the tax code look like and should we have a complete overhaul? is there a way to make it fair for more people, to have a more simplistic one, too? >> you were talking earlier about the idea of broadening the
8:13 am
base by eliminating as many loopholes and exclusions as you can, some of which may have to do with the estate tax and lowering the rates at the same time. that is the clear path forward. whether you get there is another question. that's rising above. >> truly rising above. if ursula gives owe ba obama the pin. >> i've got itten on, you told it's a condition of the show. >> i'm rising, rising above. >> you are rising so low you're making fun of it. >> because it's so low. >> you had it on your pants cuff, andrew. >> john your point? >> don't underestimate the degree of frustration out there among individual investors. i walked into my largest office, i asked the branch manager thinking of coming on the show are people selling as a strategy for accelerating capital gains,
8:14 am
they're selling because they're angry. they're angry about two years of campaigning $1 billion in advertising and we have the status quo and what did the status quo give us last time? they want a solution. >> but they walk away right now their protest vote is take their money out of the stock market. what brings them back in? >> a solution. >> they need returns. >> john taft thank you for joining us. >> thank you, you bet, andrew. >> great conversation. coming up when storm sandy devastated the northeast it forced the historic two-day market shutdown. bart chilton wants critical markets to be better prepared. he will join us next, he's here and his hair is here, too, first on cnbc. e kids. and she became the full time mother of three. it was soccer, and ballet, and cheerleading, and baseball. those years were crazy. so, as we go into this next phase,
8:15 am
you know, a big part of it for us is that there isn't anything on the schedule. one is for a clean, wedomestic energy future that puts us in control. our abundant natural gas is already saving us money, producing cleaner electricity, putting us to work here in america
8:16 am
and supporting wind and solar. though all energy development comes with some risk, we're committed to safely and responsibly producing natural gas. it's not a dream. america's natural gas... putting us in control of our energy future, now.
8:17 am
for two days the new york stock exchange was dark after the wrath of superstorm sandy. our next guest is speaking out on ways he thinks the markets can be better prepared for the
8:18 am
next crisis. cftc commissioner bart chilton joins us with his proposals. what do you think happened here? >> quickly, this isn't life or property with sandy so everybody feels for that, but i think what happened is the systems weren't tested appropriately becky and when something happens in the equities market it affects the financial futures also and these are global interconnected markets, so they had a system, a backup system. >> the electronics system. >> the electronics system, archipelago. the major firms hadn't tested the system so they're unsure whether or not the trades were going to get into the queue. in this post-9/11 world that's sort of tombstone mentality, you don't take an action until you see devastation. i'm calling for today a financial markets multiagency command, a m.a.c., something they use in the military when they have disasters like katrina
8:19 am
or sandy. they look at disaster preparedness for markets, not talking about setting up a task force for years, go in, look at this, figure out how we can do better in the future because there will be another tragedy. >> people speculated part of the problem may be you need to get the brokerage floors of the partners filled, too, and all of those brokerage floors were affected by the same thing because they were in the same area. is it a situation of needing the brokerage floors or needing a complete backup site in a different state or somewhere further away? rick santelli had talked about this, too. >> archipelago is in the new york area so you don't have something that's hundreds of miles away. that would have helped but the main problem was that people didn't adequately test the system. you remember "field of dreams" if you build it, they'll come. the new york stock exchange built it but they didn't come, in small volumes they came. that needs to change. these are electronic markets. it should be you flip a switch and everybody continues trading and these markets grease the economic engine of our
8:20 am
democracy. it's important they continue operating and that's why i proposed this multiagency command to help. >> there is this larger issue of how do you physically get people, in a storm that impacts an entire coast unless you're going to set up offices in chicago, first of all, or california, and i don't know who are the people who are going to staff and man those offices to actually trade on behalf of somebody, it's not clear to me how this works. it may very well be that when you have a massive superstorm the size of sandy that knocks out an entire coast or region that it's almost impossible to have true contingency planning. >> two things. good point. first of all, you do need to have some senior people who aren't necessarily located in the proximity of devastation. yes, you do need some senior people but in this circumstance, this is one of the things we learned, andrew, is that since they weren't sure the large traders weren't sure about whether or not they could enter the orders into the new york stock exchange, they actually
8:21 am
sent people to archipelago to try to work on the computers, in the middle of this storm, so just a really sort of a cluster and hopefully we can do better in the future. >> what happened to your own next -- isn't this a transatlantic company that has platforms on both sides of the ocean, they've got the technology, why not flip the switch and move the market making to europe? >> this is about people physically being able to trade themselves? you can have all the systems in the world but if you can't get people to a place where they can operate from. >> andrew all the probingerage firms, most of them are global. you have a platform in new york, a platform in europe, global brokerages operating around the clock. >> they're in chicago, london. >> the idea that all of a sudden there's a bottleneck because of a horrific storm. >> bill ackman who was on this morning, h in position, look, i don't know what his situation was during the storm but there were a lot of people
8:22 am
just physically would not have been in position to call somebody in london to say i need to you trade me in and out of this. maybe they'd want to, maybe they wouldn't. >> the answer is they couldn't because they didn't do this ahead of time. it's not like this hurricane snuck up on us. we knew it was coming. you could have made contingency plans. the large trading firms hadn't tested this system. the noerk stock exchange system that's why it's called for the multiagency command and if we get together we can fix it before because we know there's another tragedy of some type, with he can be better protected in the future. >> thank you very much for your time. >> sure, thank you. coming up, we'll get the latest read on small business and uncertainty amid the fiscal cliff negotiations and talk to pimco's mohamed el erian about the fiscal cliff negotiations. this is becoming a drinking game every time the fiscal cliff is said. who has the upper hand and what does it mean for investors? he'll tell us at 8:30 a.m. eastern. we're coming right back.
8:23 am
[ female announcer ] i found the best cafe in the world. ♪ nespresso. where there's a coffee to match my every mood. ♪ where just one touch creates the perfect cup. where every cappuccino and latte is made with fresh milk. ♪ and where clothing is optional. nespresso. what else?
8:24 am
8:25 am
welcome back to "squawk box" everyone. small business owners remained cautious in the month of october. this is that monthly sentiment index from the national federation of independent business. it rose to 93.1 for october, that was up 0.3. that index is traded in a narrow range over the last 3 1/2 years.
8:26 am
the survey showed business owners are somewhat more uncertain about how business will be six months from now, that's not surprising given what's going on in washington right now. when we come back, he is a "squawk" icon and rebel and market master, mohamed el erian and his four-point plan to get the country back on track and how to position your portfolio for the end of the year. take a look at the u.s. equity future this is morning, red arrows, nasdaq futures are off by 15 points. you could see also the s&p futures and the dow futures are a little weaker as well. i always wait until the last minute. can i still ship a gift in time for christmas? yeah, sure you can. great. where's your gift? uh... whew. [ male announcer ] break from the holiday stress. ship fedex express by december 22nd for christmas delivery.
8:27 am
and his new boss told him two things -- cook what you love, and save your money. joe doesn't know it yet, but he'll work his way up from busser to waiter to chef before opening a restaurant specializing in fish and game from the great northwest. he'll start investing early, he'll find some good people to help guide him, and he'll set money aside from his first day of work to his last, which isn't rocket science.
8:28 am
it's just common sense. from td ameritrade.
8:29 am
welcome back to "squawk box" this morning. let's look at some stocks on the move. home depot earning 74 cents per share, four cents above estimates and raising its forecast for the year based on signs of an improving housing market. we'll watch shares of jcpenney after they fell to their lowest since march of 2009 yesterday. bill ackman a major jcpenney shareholder told us earlier ron johnson's strategy will double the amount of revenue generated
8:30 am
per square foot. shares of vodafone takes a nearly 6 billion pounds writedown, lowers its yearly forecast. what is the exchange? >> i don't say exactly opposite anymore, i just say opposite. if you're opposite, isn't it, unless it's 179 degrees or 181. then it wouldn't be. will uncertainty over the fiscal cliff drive more investors to the sidelines? joining us is pimco's ceo and co-cio mohamed el erian. mohamed, do you just want to avoid going over the cliff or whether you have a feeling on this whole issue about whether we raise marginal rates or whether we raise effective rates
8:31 am
and broaden the base by getting rid of capping loopholes and do you have a preference? this hellish new normal you put us in, is there a way to get out of this while i'm still young, mohamed? >> and good morning to you. i hope you're doing well as well. you. you the it really well, joe, an hour ago when you said is it rates or is it the base? and the problem is that we're being pushed into this corner solutions so the theme that you're having today and your pins are right, rise above this, solve this, first we have to act on the base which means extending the base and removing distortions because it has inefficiency issues but the math tells you we have to do something with the rates so i think it's a combination of both and it's important because this is a downpayment to what has to come later withcy more
8:32 am
fundamental fiscal reforms. >> part of the argument, mohamed, and you said rates, not marginal rates. maybe you meant effective rates but part of the growth story of broadening the base and getting rid of deductions and loopholes you lower the overall marginal rate and get a higher effective rate. i started think being this, mohamed, the pools of money that are sequestered that you will never get with marginal rates because it will never be ordinary income. i'm thinking about how much money is out there that never sees the light of day in terms of the federal government being able to get at any of it. doing the other way, i want to tell the left and appeal to them, if you really want to soak the rich of rich listen to how you do it. you can't get it with marginal rates on ordinary income. >> joe you raise a ton of important issues. first it's important to
8:33 am
acknowledge there's a ton of cash on the sideline, not only the cash you've mentioned but cash sitting on balance sheets that should be invested. and we'd all be better off. >> and corporate rates, you might do something so we don't leave it overseas. >> if we lived in a first best world which unfortunately we don't but if we did, you would be absolutely right but we don't. we have the realities of math and balance sheets. first we just had an election in which the issue of the rich versus the rest was a major issue, second importantly let's not forget where we're coming from, come from a period in which the rates have had a tremendous upside and got protected on the downside and finally the economic argument you cite while valid at high tax rates it's hard to make them the overriding issue now. i say you're right to focus on all this cash sitting on the sidelines that can be productively employed.
8:34 am
if you make that your objective you'll move not only just on fiscal reform but labor market reform, credit market reform, housing reform and that's what this country needs. >> mohamed, there's a whole, you make it sound like there's no problem, we just got to get this money off the sideline and everything will be fine. there's a huge hole in consumer balance sheets, and until we address the problems that are ailing american consumers your four-point plan, getting american workers back on the job, it's hard tone vision how this is going to spontaneously spring to life. >> steven, you cited earlier the new normal, which pimco came up with in 2009 says hey, be careful, this is a balance sheet issue, this is not a cyclical issue. the problem is that the dynamics of the new normals have been now complicated by the political side. the polarization of our political parties makes it much more difficult to reengineer the
8:35 am
exit from the new normal, sluggish growth, high unemployment. it's not easy but it's great we're discussing it now and hopefully our politicians can start getting to the right place. >> mohamed, i still, and you're not the only everyone that says it but we had an election that was obviously about raising rates on wealthy people or those above 250 and i heard it was a majority, which it wasn't, 47% said to raise taxes not on everybody but just on the rich so it's 47% voting to raise the rates on 2% of the people. do you think it's hard to convince 47% to raise the rates on 2%? and you know the coalition that the president was able to put together that resulted in a 2 percentage point win. so it also, you know, the house was also reelected. it gets reelected every two years and i can tell you, that that house, what it's made up of right now, those are the same guys that will not go for this marginal rate. why not just concede that and do it in a bigger way, do it in a more, it's totally balanced, you
8:36 am
can do it with deductions and loopholes, you can raise effective rates, make the high end more progressive, you can raise revenue on the high end by getting more money from the high end but just not with marginal rates. why just keep insisting on that when you know the house is not going to do it? >> joe, we're not insisting. i'm not insisting. >> i read your stuff, you're insisting. >> if anything i'm telling you let's not go into the corner solutions because the minute we go to the corner solutions we get paralyzed. >> the president had his corner again last -- looked like he was still campaigning, he had the cross section of u.s. citizens behind him all nodding as he was talking and he threatened about vetoing any bill. we're in the corners. the corners are made and an election of 50/48 doesn't settle anything. >> what does your pin say? >> rise above. knock yourself out if you want to get at the money you can't do it with ordinary income, you need capital gains, dividends,
8:37 am
you into ed to get at it with all these loopholes because you raise rates and leave the loopholes in, the effective rate stays low. >> as steven said one of the problems now is this whole issue just the fiscal cliff has become such a big issue that it's diverting everybody's attention and we're ignoring what's happening else where in the economy and ignoring what's happening else where in the world and it's not surprising that people are taking risk off the table because they are seeing the whole picture and all i'm saying to you is in rising above we've got to find a way to move forward. >> you need a button. do you think you can get bill gross to wear one? >> please send it over. we're all for rising above. >> even give one to the her mitmit mit, what's his name, paul? find him, he's up on a mountain somewhere. lotus position somewhere. >> he shaved. >> i went with him for a walk saturday, he's loving life.
8:38 am
>> did he ask you what was the sound of one hand clapping. >> we were talking about how the bengals are doing as well. >> against the giants are you a bengals fan, you are? >> it was very impressive what you guys did to the giants. >> he's a jets guy. tebow, yes or no -- >> rise above, rise above, remember. >> should woody johnson rise above and start tebow? >> no, not yet. >> when? >> not yet? what's it going to take? >> how about firing rex? >> not yet. >> mohamed we have steven roach here today, he was invoking your name earlier, talking about how consumers really have gotten crushed because of the debt that they're trying to get out from under. he was talking about the new normal, and we figured we'd have you here to talk more about it, too. is this an endless cycle at this point? >> it shouldn't be, becky. the new normal basically said we overdid it during the great age of debt, of leverage and of
8:39 am
credit entitlement and now we've got to deal with the consequences so it's a balance sheet element. the corporate sector is fine, they've really cleaned up their balance sheet. the household sector is doing better, now all these excesses have been shifted to the government sector, that's why we've got to restore growth because the best way is through economic growth. what i'm worried about and we're going to have our discussions coming up in may is how do you do that in the context of political dysfunction, and that's what you've been talking about for days, if not weeks, and if you go to europe it's worse. they can't agree on how to support greece in europe so this issue of political dysfunction is one that investors have to understand better because political risk is playing a major role in markets today. >> mohamed, you haven't fixed the consumer balance sheet problem. you've made progress on the road to balance sheet repair, but the debt-to-income ratios for the
8:40 am
aggregate consumer sector still 113% versus the 30-year norm of 75. the personal savings rate is 3.3% versus a norm of close to 8%. they're all better than the extremes that we had in this era of excess, but we've got real lasting problems that are going to provide powerful head winds holding back the private sector, the consumer sector of the united states for years to come. so it's more than just politics and the federal sector's balance sheet. it's the household sector's balance sheet and it's i think hard to draw a great comfort from the fact that the corporate sector is in great shape in this type of a climate. >> so steven, you could design a solution to this, and you're absolutely right, we have made progress on the household balance sheet but we haven't yet fixed it. there is a corporate balance sheet. if the corporate balance sheet could take advantage of other
8:41 am
healthy balance sheets around the world, you could get a handoff that facilitates the de-leveraging of the household and facilitates dealing with the fiscal issues. the problem is, and we've talked about it before, the corporate sector that's healthy has all this cash and sitting on the sideline and it's not investing in plant equipment and people because of the uncertainties out there, so the great thing about the u.s. and it's important to remember this, is there's a huge potential between the cash on the side line, between the innovation that's taking place, there's a huge, if only we can get the corporate sector to invest more, i think you can start to engineer a handoff but that's going to require lots of other things happening. >> all right, mohamed, we're going to leave it there. thanks for your time. we'll see you soon. who do the jets play this week? they're off? >> they've been off all the time. >> they've been off for a while. >> the giants have a bye week. >> rams, okay. they play the rams.
8:42 am
see you later, mohamed. when we come back, we have much more from squawk market master ceo steven roach. sis crow set to report quarterly results after the closing bell today. tomorrow we'll engage the afterhours reaction in the stock. "squawk" will be right back. from local communities to local businesses. the potential of yelp unlocked. nyse euronext. unlocking the world's potential. to a currency market for everyone. the potential of fxcm unlocked. nyse euronext. unlocking the world's potential. when you take a closer look... the best schools in the world... see they all have something very interesting in common. they have teachers... ...with a deeper knowledge of their subjects.
8:43 am
as a result, their students achieve at a higher level. let's develop more stars in education. let's invest in our teachers... they can inspire our students. let's solve this. we believe the more you know, the better you trade. so we have ongoing webinars and interactive learning, plus, in-branch seminars at over 500 locations, where our dedicated support teams help you know more so your money can do more. [ rodger ] at scottrade, seven dollar trades are just the start. our teams have the information you want when you need it. it's another reason more investors are saying... [ all ] i'm with scottrade.
8:44 am
8:45 am
welcome back to "squawk box," a major shakeup at microsoft, the man in charge of all windows software is out, cnbc's jon fortf joining us again, jon, i'm nervous. go, boo. >> reporter: i'm nervous, too, joe. >> it worked. last time you started talking we got nothing. we got you this time. >> it's so much better when it's multimedia. steve sinofsky president of the windows division at microsoft is out. this is a big deal because he was the most visible engineering executive at microsoft, often mentioned as a potential successor to steve ballmer as ceo. his is the latest high profile exit. ray ozzie chief software architect left two yeernlgd as did robby bak, steve allard and this sinofsky move is reminiscent of forestall's
8:46 am
ouster. he was a big part of the answer to the windows vista debacle and also clashed with fellow executives at microsoft along the way. this shift at microsoft points to a major trend in how the companies build products for their customers, trying to pull together hardware, software and services with a level of seamlessness that's never worked before, and at both apple and microsoft the ceos apparently decided the ability to work well with the rest of the team in doing that is more important than just the software part. executives julie larson green and tammy reller will split sinofsky's duties, both will report to steve ballmer. if you're not steve jobs or bill gates, the culture of these companies won't let you act like steve jobs or bill gates. that's one of the takeaways here. >> looks like jeff bezos. >> we said that. well actually i was going to talk about does anyone have any hair at microsoft, jon, but i
8:47 am
was forgetting who was introing all, i apologize hair doesn't matter. it's a good look, it is. i like it, but and i think it makes you look smarter if you're at microsoft, doesn't it? that guy had a brain pan looks like, right? >> he was shaved all the way around. that's part of the look. >> i think that's part of the look. >> i'm not sure ballmer does that. >> you know the testosterone. >> obviously. >> because we are not very testosterone heavy. >> i'm aware. >> not my fault. more from our guest host steven roach a senior fellow at yale university and former executive at morgan stanley and a market master. >> always a market master. >> you've been listening this the whole morning through telling us where you see things headed it's a gloomy outlook when you start looking down the road with or without the fiscal cliff. what does that mean for the markets at some point? >> the gloomy global growth, becky, will be driving gloomy
8:48 am
global earnings and markets were certainly worried about the earnings outlook for 2013 with good reason. but the cynic in me says that's what this fiscal cliff is all about, get people really worked up about the fact that we're going to go off the cliff and go into recession, cut a last-minute deal and the markets which have discounted the worst case fiscal cliff scenario will surge on the basis hey maybe it's not as bad as we thought. i think this is all of a bit of a hype for people who have nothing better to do. not you guys. >> does that mean you think this market has worked in the worst case scenario if there's not a fiscal solution? >> actually go off the cliff for a few days in early 2013. it will be sort of like it was when t.a.r.p. failed for a few days in 2008. >> those were some awful days if i remember. >> but look they came back, t.a.r.p. was passed and everything was fine.
8:49 am
so it could be volatile and bouncy, andrew, but i think again, even congress in its wildest dysfunctional days will not push the economy into recession in 2013. >> which is an excuse for buying on every one of these dips. >> yes. remember, the road runner and wile e. coyote flies off the cliff, and every once that? while he gets snagged on a bank half way down. that is what will happen. >> patty murray said absolutely if we don't raise that marginal rate back to 39.6 we're not going to do a deal, and i can tell you that the guys in the house and boehner, they really want to do this, this limiting deductions, limiting loopholes, raising effective rates, but lowering nominal rates. they want to do it that way but the president may say no and those guys in the house will say
8:50 am
no and we might, it might happen. >> it might, but look, this is a leadership moment. we have a a leader who now has second term. he's a president. he's a fascinating individual in many respects. he's part of the problem. >> what gives you any indication he'll lead in this case? >> maybe he'll wake up to the fact that he has a chance to cut through the polarization and leave a winning legacy. this is his chance to rise above. give him a button. >> there you go. thank you for that, steve. we have more ahead from steve. coming up, we're going to talk about several stocks on the move ahead of the opening bell. we'll get down to "mad money's" jim cramer. "squawk on the street," jim cramer right after this.
8:51 am
sometimes investing opportunities are hard to spot. you have to dig a little. fidelity's etf market tracker shows you the big picture on how different asset classes are performing, and it lets you go in for a closer look at areas within a class or sector that may be bucking a larger trend. i'm stephen hett of fidelity investments. the etf market tracker is one more innovative reason serious investors are choosing fidelity. get 200 free trades today and explore your next investing idea.
8:52 am
8:53 am
let's get down to the new york stock exchange where jim and david join us now. >> how are you doing. >> home depot. what do you think? >> a classic case of what's happening in this market. news comes out and joker hedge fund guys say that's terrible and you finish release and it's
8:54 am
good. this is a company that's now past the sandy cliff and is going to start benefiting from it. i find cliffs everywhere. and this is a good company that did great. >> i want to hear from you on jcpenney, cramer. he's very good. i thought, you know what? if he's got enough time, maybe it works. i don't know as you're bleeding. >> you have to look at it on a consolidated basis. 89% of it is hideous and terrible. 11% as we learned from andrew ross sorkin today is terrific. if you look at consolidated, it means it's fabulous, doesn't it? >> could it be? >> remember at our conference last summer? july, i had ackman on a panel. articulate. gave a real case. was totally behind mr. johnson and his strategy and the stock
8:55 am
soared from there over the next couple of months only to collapse over the last few weeks. i don't know. i preferred andrew's piece. 11% versus 89%. what do they have left in cash? a billion dollars? >> about half a billion right now. may go up after the holidays. >> george mcgovern was really behind -- he was behind him 1,000%. i'm sure that ackman is behind johnson 1,001%. >> do you rise above on "mad money" but not on "squawk on the street"? inquiring minds -- you're only rising at certain times. is it an after market? >> it's my fault. i'll take full responsibility. >> there it is. >> all right. never mind. very nice. >> i'll ask for that one too. >> we'll see you in a minute on
8:56 am
"squawk on the street." coming up, we'll let the last word from our guest host. tdd#: 1-800-345-2550 this morning, i'm going to trade in hong kong. tdd#: 1-800-345-2550 after that, it's on to germany. tdd#: 1-800-345-2550 then tonight, i'm trading 9500 miles away in japan. tdd#: 1-800-345-2550 with the new global account from schwab, tdd#: 1-800-345-2550 i hunt down opportunities around the world tdd#: 1-800-345-2550 as if i'm right there. tdd#: 1-800-345-2550 and i'm in total control because i can trade tdd#: 1-800-345-2550 directly online in 12 markets in their local currencies. tdd#: 1-800-345-2550 i use their global research to get an edge.
8:57 am
tdd#: 1-800-345-2550 their equity ratings show me how schwab tdd#: 1-800-345-2550 rates specific foreign stocks tdd#: 1-800-345-2550 based on things like fundamentals, momentum and risk. tdd#: 1-800-345-2550 and i also have access to independent tdd#: 1-800-345-2550 firms like ned davis research tdd#: 1-800-345-2550 and economist intelligence unit. tdd#: 1-800-345-2550 plus, i can talk to their global specialists 24/7. tdd#5-2550 and trade in my global account commission-free tdd#: 1-800-345-2550 through march 2013. tdd#: 1-800-345-2550 best part... no jet lag. tdd#: 1-800-345-2550 call 1-866-506-9616 tdd#: 1-800-345-2550 and a global specialist tdd#: 1-800-345-2550 will help you get started today. the latest coffee machine from nespresso. modular. intuitive. combines espresso and fresh milk. the new u. nespresso. what else? available at these fine retailers. well, having a ton of locations doesn't hurt. and my daughter loves the santa. oh, ah sir. that is a customer. let's not tell mom. [ male announcer ] break from the holiday stress. fedex office.
8:58 am
>> you know what this means?
8:59 am
home improvement. stock of the day home depot indicated up 95%. higher than expected quarterly profit earnings raising full-year outlook. the company benefited from recent improvements in the u.s. housing market among other things. look at that stock. up 50%. >> wow. >> opposite of jcp. >> exact opposite i dare say. >> let's get back to our guest host for the last word. we didn't ask you for a last word but if you had to sum everything up, what would it be? >> keep it clean. >> china. the next transition. we'll know in a couple of days formally who the new leaders are. they have got a tough road to hoe. they have to move ahead aggressively in transforming the world's second largest economy changing stripes from an export machine to more of a consumer model. there's a lot they can do. it's


info Stream Only

Uploaded by TV Archive on